Happy New Year to all of you – I was trying to think of an adjective to describe 2013 and all I can think of is “fast.” The year just flew by.
From a tax perspective, the adjective would have to be “complicated.” Although the Affordable Care Act (Obama Care) was passed a couple of years ago, the major provisions affecting taxes will start with the filing of the 2013 tax returns.
Those provisions include the new 3.8% tax on interest/dividends/rents for high income earners (those with AGI over $250,000). Also starting back in 2013 is the phase out of itemized deductions and the personal exemption. Add these to the higher tax rates, and you get more money in the hands of Uncle Sam.
So you have come to my blog looking for answers to these complicated and imposing tax changes. I can tell you that the answers are only found through a sit down with your CPA who can go over your exact situation. There is no universal magic wand I can wave.
I can say that the answer is not to move to another country (although the Bahamas still sound pretty inviting). We have a tax system that is still lower than many countries. I would not suggest making less money since the American Dream is to be all you can be. The answer is unique to you. Each person will make decisions both for tax and non-tax strategies.
Donations to charity have both tax and non-tax benefits and is a favorite option. Gifting to your kids now allows them to make use of the money they will eventually get and also transfers the earnings to their returns. Investing in stocks that appreciate but do not pay dividends wil increase your portfolio but not expose you to the new 3.8% tax. These are a few ways to help reduce your tax burden.
So for 2014 tax planning, come in and see me this year. Let me charge you a few extra dollars and give you some tailored tax planning information that could save you way more than the cost of that information. The additional benefit is that you and I get to have a chance to talk face to face. In this electronic world of emails and attachments, it is easy to avoid your accountant all together. I can certainly tell you that is not one of the answers to understanding and reducing your tax burden!
Thanks for listening and I will talk at you again.